Business psychology

Psychologists have long been interested in the field of economics.

You might wonder why? fact of the matter is that, most economic decisions have a psychological dimension, because after all it is people who decide what to do whether it's economics or politics or any other field and wherever people are involved psychology is bound to be involved.

Example:

For an example at a tourist resort in a Caribbean Island a man had a souvenir shop. Many of the objects were very inexpensive, yet he was not making any sales. The owner got very disappointed and decided to go on vacation during peak season time, because he was so disappointed by the performance of his shot.

So, he told the assistant multiply the prices of every object, every product by one over two he left the instruction and went away. The assistant did not really understand the instruction and doubled the price of everything. When the owner came back, he was surprised to find that nearly every souvenir in his shop was sold.

This phenomenon was shared with psychologists, who were intrigued by this but as we psychologists do we try to understand and explain how things happen.

So, one logical explanation was people really don't know the value of things, that was the first assumption.

The second assumption was that people judge the value of a product by its price.

So, this is a very interesting finding for economists because they had very complicated pricing theories, pricing formulae, but we know that usually cost of an object has a very distant relationship with its price. Pricing is something much more complicated.

Psychologists contributed to our understanding of pricing, of how a consumer sees the value of a product.

Example:

For an example I was running a training program. Where the cost was very high and there was a very large number of people attending. But many people would complain many students would complain they would say sir your training programs are very expensive we can't afford them, we can't return them, why don't you lower the price. So, I decided okay this program would be include students it would include anybody, and everybody wants to attend.

So, I reduced the price by 90 and only offered it at 10 of the original cost. What do you think happened not a single person registered workshop.

You know I learned my lesson and I said Well you know I should be guided by psychological principles when it comes to pricing.

Now what happens, when a salesman arrived at your door and is offering your product. Psychologists studied the behavior of not only the salesman, but also the people who buy things from door-to-door salesman.

The same research was then extended to what is considered telemarketing and we studied how people market these objects and what is the profile of people who buy products advertised on television.

But things have changed, and things have moved very quickly to the internet and so since then we've been studying how things are sold on the internet and what kind of people buy things over the internet.

The field of advertising has changed so quickly, that if I start sharing with you the old principles of door-to-door marketing, I think it would be a waste of time because the technology around it and the strategies around it have changed so much.

Example:

For an example, in order to do door-to-door marketing the salesman was given some profile of the individuals that they were going to communicate with they were given some data, but the data was very basic very sparse.

Now the marketing companies over the web have so much information available about every individual, that they need sophisticated statistical packages to uncover the individual profile. But the individual profile is nearly perfect.

You know and I would say that the kind of psychological insights that we're getting from analysis of big data as it is called data from Facebook or amazon, or twitter is incomparable in terms of insights it delivers us about a person. Think about it a company that knows what you click on when you're on google, a company that knows what you put in the search box on a website, company that knows when you're scrolling over the mobile phone YouTube app where do you pause you must have wondered you know when you pause it starts to show you the transcripts of the video and it can it collects that data also, a company that knows not only what you're interested in watching but also collects information about what you're talking about.

Example:

So, for instance you're talking to a friend while holding your mobile phone about something and that data is recorded by the microphone the information given over the microphone to that company is used by the algorithm to suggest the items that you will see.

So, things have changed, and I believe that psychologists need to move in big time into the big data domain. If we are to really understand people, this is a great opportunity, and it is going to be very exciting.

Gone is the day I believe for laboratory experiments using stooges and worrying about randomized control trials.

I may be considered a maverick for suggesting that, but I would say the future lies in the study of big data. Let's stay with it.